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Do Individuals Recognize Cascade Behavior of Others? - An Experimental Study -

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  • Tim Grebe
  • Julia Schmid
  • Andreas Stiehler

Abstract

In an information cascade experiment participants are confronted with artificial predecessors predicting in line with the BHW model (Bikchandani et al., 1992). Using the BDM (Becker et al., 1964) mechanism we study participants' probability perceptions based on maximum prices for participating in the prediction game. We find increasing maximum prices the more coinciding predictions of predecessors are observed, regardless of whether additional information is revealed by these predictions. Individual price patterns of more than two thirds of the participants indicate that cascade behavior of predecessors is not recognized.

Suggested Citation

  • Tim Grebe & Julia Schmid & Andreas Stiehler, 2006. "Do Individuals Recognize Cascade Behavior of Others? - An Experimental Study -," SFB 649 Discussion Papers SFB649DP2006-079, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  • Handle: RePEc:hum:wpaper:sfb649dp2006-079
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    3. Ron W. NIELSEN, 2016. "The Unresolved Mystery of the Great Divergence is Solved," Journal of Economic and Social Thought, KSP Journals, vol. 3(2), pages 196-219, June.
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    7. Christoph March, 2019. "The Behavioral Economics of Artificial Intelligence: Lessons from Experiments with Computer Players," CESifo Working Paper Series 7926, CESifo.
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    9. Ron W. NIELSEN, 2016. "Mathematical Analysis of Historical Income Per Capita Distributions," Turkish Economic Review, KSP Journals, vol. 3(2), pages 300-319, June.
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    12. Brzezicka, Justyna & Wisniewski, Radoslaw & Figurska, Marta, 2018. "Disequilibrium in the real estate market: Evidence from Poland," Land Use Policy, Elsevier, vol. 78(C), pages 515-531.

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    More about this item

    Keywords

    Information Cascades; Bayes' Rule; Decision Under Risk and Uncertainty; Experimental Economics.;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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